After establishing an 8.72% stake in Avadel Pharmaceuticals PLC (AVDL, Financial) in the fourth quarter of 2017, Charles Brandes (Trades, Portfolio), chairman of Brandes Investment, further expanded his position on March 29.
According to GuruFocus real-time picks, the guru invested in 1.5 million shares, increasing the holding by 45.35%. He paid an average price of $7.29 per share. He now holds slightly over 4.8 million shares, which represents roughly 0.55% of the portfolio.
Brandes, who picks stocks using a Benjamin Graham-style approach, has lost an estimated 14% on the investment since establishing the stake in the final months of the year.
The Irish specialty pharmaceutical company has a market cap of $285.02 million; its shares were trading around $7.51 on Monday with a price-earnings ratio of 4.64, a price-book ratio of 3.45 and a price-sales ratio of 1.80.
According to the Peter Lynch chart below, the stock is undervalued as it is trading below its fair value.
It is also trading below its historical median price-sales value.
As Avadel has a comfortable level of interest coverage and a low debt-to-equity ratio, GuruFocus rated its financial strength 7 out of 10. Its Altman Z-Score of 1.62, however, suggests the company is under financial stress.
Its profitability and growth was rated 6 of 10 by GuruFocus. The company has a strong operating margin, which outperforms 98% of competitors, and a moderate Piotroski F-Score of 6. In addition, its business predictability registered a one-star (out of five) rating.
With 3.02% of outstanding shares, Jim Simons (Trades, Portfolio) is also a shareholder.
The value investor’s current portfolio of 161 stocks is largely composed of securities in the financial services and health care sectors. Additional pharmaceutical stocks he holds include Taro Pharmaceutical Industries Ltd. (TARO, Financial), GlaxoSmithKline PLC (GSK, Financial), Merck & Co. Inc. (MRK, Financial), United Therapeutics Corp. (UTHR, Financial), Sanofi SA (SNY, Financial), PDL BioPharma Inc. (PDLI, Financial), Ampio Pharmaceuticals Inc. (AMPE, Financial), Novelion Therapeutics Inc. (NVLN, Financial) and Aptose Biosciences Inc. (APTO, Financial), among others.
According to its fact sheet, Brandes’ U.S. Value Equity Fund underperformed the S&P 500 Index in 2017 with a return of 14.96%. The index returned 21.83%.
Disclosure: No positions.
